Axis Bank slips on higher provisioning, analysts remain positive

NEW DELHI: Axis Bank Ltd slipped over 2 percent in trade on Tuesday after the bank reported its first quarter numbers of FY13 weighed down by higher provisioning and NPA levels.

The stock closed 2.1 percent lower at Rs 1,023.30. It hit a low of Rs 1,014.55 and a high of Rs 1,061.50 today.

Although the bank reported a net profit largely in line with ET Now estimates, higher provisioning costs and an increase in NPA (non-performing assets) disappointed investors.

Provisioning for the quarter increased almost 50 percent to Rs 259 crore compared to Rs 175.84 crore in the corresponding quarter of the last fiscal.

"We believe Axis Bank has reported excellent numbers and provisioning has peaked during the quarter and should maintain a lower run rate for the rest of FY13," Vinayak Kanvinde, Portfolio Manager at Right Horizons, said.

"From a valuations perspective, the ability to grow book at 20 percent YoY in the next 3 years makes 1.75x current P/B appear reasonable and leaves potential for an upside. We have a target of Rs 1,350 over the next 12 months with a 2.0x P/B on FY13 numbers," Kanvinde added.

The stock is trading at attractive valuations, more than 50 percent discount to HDFC Bank despite similar earnings quality, profitability and growth expectations over FY14, Angel Broking noted in a report.

The lender's net profit for the quarter ended June 2012 grew to Rs 1,153 crore, up 22 percent YoY from Rs 942.4 crore.

Both gross and net NPAs for Q1FY13 remained unchanged at 1.06 percent and 0.31 percent, respectively. However, on a sequential basis, gross non-performing assets (GNPAs) moved higher by 12 bps to 1.06 percent against 0.94 percent in the previous quarter.

"The bank's asset quality is a matter of concern as both the GNPA and NNPA increased," Sanjeev Jain, Research Analyst- BFSI at Microsec Capital Ltd, said.

"However, the CAR is still 4.03 percent higher than the stipulation, which is good for the private sector bank," Jain added.

"In quantitative terms, Axis Bank posted numbers higher than our estimates though earnings quality took a dent. Higher core interest income and net profit are ahead of our estimations due to stronger business growth. A dent in margins is due to weakness in liability franchise," a Dolat Capital Market report noted.

Most analysts are positive about the private banking space supported by visible earnings growth which is expected to come around 20-25 percent and asset quality.